Shares of ITC Ltd, one of India’s leading diversified conglomerates, slipped over 1.6% on Friday, January 7, following the release of its Q3 FY25 financial results. Despite reporting a 9.05% increase in revenue, the company’s consolidated net profit declined by 7.27% year-on-year, leading to a cautious reaction from investors.
At ₹434 per share on the BSE, ITC’s stock was down 1.68% during morning trade, while on the NSE, it fell 1.54%. This dip reflects the market’s response to the company’s mixed financial performance and ongoing challenges in managing input cost escalations.
ITC Q3 FY25 Financial Highlights
ITC reported a consolidated net profit of ₹5,013.16 crore for the quarter ended December 2024, compared to ₹5,406.52 crore in the corresponding quarter of the previous fiscal year. The decline in profits was attributed to rising input costs and a subdued demand environment across several business segments.
However, the company managed to achieve a 9.05% increase in revenue from operations, reaching ₹20,349.96 crore, up from ₹18,660.37 crore in Q3 FY24.
| Metric | Q3 FY25 | Q3 FY24 | YoY Change |
|---|---|---|---|
| Consolidated Net Profit | ₹5,013.16 crore | ₹5,406.52 crore | -7.27% |
| Revenue from Operations | ₹20,349.96 crore | ₹18,660.37 crore | +9.05% |
| Gross Sales of Products/Services | ₹20,140.15 crore | ₹18,520.40 crore | +8.74% |
| Total Expenses | ₹14,413.66 crore | ₹12,852.40 crore | +12.18% |
Key Business Segment Performance
1. FMCG Segment (Including Cigarettes)
The FMCG segment, which includes the core cigarettes business, contributed significantly to ITC’s revenues.
- Total FMCG Revenue: ₹14,372.53 crore, up 6.35% from ₹13,513.43 crore in Q3 FY24
- Cigarettes Business Revenue: ₹8,944.83 crore, up 7.83% from ₹8,295.18 crore in the year-ago period
The cigarettes business saw steady growth despite the challenges posed by illicit trade and rising input costs in leaf tobacco. ITC attributed the growth to strategic portfolio and market interventions aimed at countering illicit trade and driving volume-led growth.
2. FMCG-Others Segment
The FMCG-Others segment, which includes products like atta, spices, snacks, frozen foods, dairy products, premium personal care, homecare, and agarbatti, recorded a 4% growth in revenue:
- Revenue: ₹5,427.7 crore, up from ₹5,220 crore in the same period last year
The company noted that the growth in this segment was driven by the atta, spices, frozen snacks, and premium personal wash categories. However, subdued realization and rising domestic wood prices continued to weigh on margins.
3. Hotels Business
ITC has demerged its hotels business into a separate entity, ITC Hotels Ltd. Despite the demerger, the company reported strong growth in this segment:
- Revenue: ₹922 crore, up 14.6% YoY
- Best-Ever Quarterly Performance: The hotels segment achieved its highest-ever quarterly revenue, reflecting strong demand in the hospitality sector.
4. Paperboards, Paper & Packaging
The Paperboards and Packaging segment continued to face margin pressures due to surging input costs, particularly in wood prices. However, ITC maintained a sharp focus on portfolio augmentation and structural cost management to mitigate these challenges.
Rising Input Costs Impacting Profitability
ITC cited sharp escalations in input costs as a major factor affecting its profitability in Q3 FY25. The company faced rising costs in key raw materials, including:
- Edible Oil
- Wheat
- Potato
- Leaf Tobacco
- Wood
- Packaging Materials
Despite these challenges, ITC managed to partially offset the cost pressures through product-mix enrichment and strategic market interventions. The company also emphasized its focus on structural cost management interventions to improve margins in the long term.
Dividend Declaration
In a separate filing, ITC announced an interim dividend of ₹6.50 per share of ₹1 each for the financial year 2024-25. The dividend announcement reflects the company’s commitment to rewarding shareholders despite the challenging business environment.
Strategic Acquisitions and Expansions
In a move to strengthen its presence in the frozen, chilled, and ready-to-cook foods segment, ITC announced the acquisition of Prasuma and Meatigo brands.
- Prasuma: A leading player in the frozen and chilled foods space in India
- Meatigo by Prasuma: Specializing in premium meat products and ready-to-cook offerings
ITC has signed definitive agreements to acquire a 100% stake in Prasuma over the next three years, expanding its portfolio in the rapidly growing frozen foods market.
Market Reaction and Share Price Performance
Despite the revenue growth and strategic acquisitions, ITC’s share price experienced a decline of over 1.6% post the Q3 results announcement.
- BSE: ₹434 per share, down 1.68%
- NSE: ₹433.80 per share, down 1.54%
The decline in the share price reflects investor concerns over the decline in net profit and the impact of rising input costs on margins.
Analyst Views and Market Sentiment
Market analysts have expressed mixed reactions to ITC’s Q3 performance. While the revenue growth and diversification into the frozen foods market are seen as positive developments, the decline in net profit and rising cost pressures remain areas of concern.
- Positive Outlook: Analysts believe ITC’s strong brand portfolio and strategic acquisitions will drive long-term growth, especially in the FMCG and frozen foods segments.
- Caution on Margins: However, the persistent rise in input costs and subdued demand in certain segments could weigh on margins in the near term.
Future Outlook
Looking ahead, ITC remains committed to:
- Strengthening Its FMCG Portfolio: Continued focus on portfolio diversification and new product launches in high-growth categories like frozen foods and personal care.
- Mitigating Input Cost Pressures: Implementation of cost management strategies and operational efficiencies to protect margins.
- Expanding Hospitality and Paper Segments: Leveraging the strong performance in the hotels and paper businesses to drive overall growth.
- Sustainable Growth Initiatives: Investing in sustainability and environment-friendly practices across all business segments.
Conclusion
ITC’s Q3 FY25 results present a mixed bag of strong revenue growth offset by declining profitability due to rising input costs. While the market reacted cautiously, the company’s diversification efforts, strategic acquisitions, and commitment to shareholder returns position it well for long-term growth.
Investors and analysts will closely watch ITC’s ability to navigate cost pressures and capitalize on emerging opportunities in the FMCG and hospitality sectors in the coming quarters.
